Court Sides with ‘De-Commissioned’ Employee

February 25, 2020

A recent decision by the Massachusetts Supreme Judicial Court (SJC) highlights yet again what happens when an employer violates the state wage-and-hour law by terminating an employee unjustly and ultimately denying the employee wages owed under the company’s sales commission plan.

This case began when a salesperson obtained a $20 million software-sales contract, the largest in the company’s history, for her employer. The employer’s commission policy stated that the employee was entitled to a commission for the first year of the contract and then a subsequent commission based on the entire value of the contract if the two parties renewed the contract following a 30-day review period one year after the contract was signed.

The company commission policy also stated that the salesperson’s right to any commission would evaporate if the salesperson were terminated “for any reason.”

The employer finalized the sales contract on March 4, 2016. Less than one month after the contract was signed, the employer fired the salesperson after she complained about not receiving the full commission she believed was owed in the guaranteed (first year) portion of the contract.

She then sued alleging sex discrimination, wage-act violations, retaliation, and breach of the covenant of good faith and fair dealing. The employee claimed that she was entitled to a bigger commission than she received on the guaranteed portion of the contract and that the separate commission due after the one-year and 30-day period has expired.

Following a trial, the jury determined that the company violated the Massachusetts wage act by not paying the employee the proper commission on the first part (year 1) of the contract and then retaliated against her by firing her, denying her $349,000 in unpaid sales commissions that she would have received on the full value of the contract had she not been fired.

The jury also determined that the company had breached the implied covenant of good faith and fair dealing by firing the plaintiff to avoid paying those commissions and in retaliation for her complaints of being discriminated against based on her sex and not being paid what she was owed.

In determining damages to the employee, the jury awarded $25,063 in unpaid wages for the first year of the contract, and $349,098 owed for the remainder of the contract. It also awarded $240,000 in punitive damages and $40,000 in emotional distress damages stemming from the employer’s retaliatory action against its former employee.

While the trial court judge trebled the $25,063 under the wage act, the judge disagreed with the jury and ruled that the saleswoman was not entitled to the $349,000 because the future commissions were not yet “due and payable” at the time of her firing.

The saleswoman appealed to the SJC.

A unanimous SJC disagreed with trial judge’s ruling, stating that the only reason she was denied the commission due on the full contract is because the company fired her. The SJC opinion went on to state that she was entitled to the full $349,000 that she lost as a result of retaliation and that the back wages owed to the employee should automatically be trebled under the wage act leading to a recovery of almost $1 million in unpaid wages.

As the justice writing the decision noted, “A policy that conditions payment on continued employment cannot relieve an employer from the obligation of paying a commission where the employer terminates its employee in retaliation for complaining about violations in the first place.”

Perhaps the termination seemed like a good idea at the time or the company thought it had valid reasons, but it is easy to see the employer’s mistakes. The company’s biggest contract ever is signed and fewer than 30 days later the employee who brought in the contract is fired and denied further commission.

While the company may have had a policy, it clearly broke the law and denied the employee money to which she was entitled. The case serves as a further reminder that while Massachusetts remains an employment-at-will state, that doctrine does not give the employer the right to break the law.